- Asian stock market:
- Futures prices fall in US stocks as earnings season approaches
- Oil lifts energy complex, fuels inflation risk
- Dollar hits yen’s highest level since April 2019
SYDNEY, Oct 11 (Businesshala) – Asian shares fell on Monday as global inflation supported a hedge on US equities as commodities, while rising US bond yields pushed the dollar to a two-and-a-half-year peak against the Japanese yen Gave.
Nasdaq futures and S&P 500 futures were both down about 0.5% in early trade, as oil prices extended their bull run.
“Bond yields continue to rise, inflation expectations are rising and monetary tightening in various forms is becoming more prevalent,” analysts at ANZ said in a note.
“The global chips shortage will extend well into next year, adding further uncertainty to an uneven recovery,” he said. “Add to that the energy crunch, and the economic outlook is materially calmer than the optimism that accompanied the early stages of a global recovery.”
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) lost 0.2% and Australia (.AXJO) lost 0.9%. Japan’s Nikkei (.N225) dropped 0.5% after falling 2.5% last week.
Earnings season kicks off this week and is likely to bring stories of supply disruptions and rising costs. JP Morgan reported on Wednesday, followed by BofA, Morgan Stanley and Citigroup on Thursday, and Goldman on Friday.
The focus will also be on US inflation and retail sales data and minutes from the Federal Reserve’s last meeting, which should confirm that November’s tapering was discussed.
While Friday’s headline US payroll numbers disappointed, it was partly due to reopening problems in state and local education, while employment in the private sector remained strong.
In fact, labor shortages reduced the unemployment rate to 4.8%, investors were more concerned about the risk of wage inflation and Treasury yields rose sharply.
The yield on 10-year notes was trading at 1.61%, the biggest increase of 15 basis points since March last week.
Bonds also sold out in Asia and Europe, with short-term yields hitting the highest level in the UK since February 2020.
Analysts at BofA warned that energy costs would pick up the pulse of global inflation, with oil potentially above $100 a barrel amid limited supply and strong reopening demand.
The winners in such a scenario would be real assets, real estate, commodities, volatility, cash and emerging markets, while bonds, credit and stocks would be negatively affected.
BofA recommended commodities as hedges and held 20-25% of the resources noted in major equity indices in the UK, Australia and Canada; 20% in emerging markets; 10% in the Eurozone, and only 5% in the United States, China and Japan.
The dollar was lowered as US yields outpaced those in Germany and Japan, hitting an all-time high of 112.27 on the yen since April 2019.
The euro was hovering at $1.1566, having hit its lowest level since July last year at $1.1527 last week. The dollar index stood at 94.158, having climbed a recent top of 94.504.
A stronger dollar and higher yields weighed on gold, which offers no fixed returns, leaving it at $1,753 an ounce.
Oil prices rose again to their highest level in nearly seven years after rising 4% last week.
Brent climbed 25 cents to $82.64, while US crude rose 41 cents to $79.76 a barrel.